Tuesday, October 26, 2010

So, what economic idea *is* hard to popularize?

In my last post, I ridiculed the idea that the Arrow Impossibility Theorem is somehow underappreciated. Do I have an answer to Tyler Cowen's request for a hard-to-popularize result in economics, then?

Yes, I do: the Put-Call Parity Theorem, and I gave my attempt at explaining it herea while back. It's important because it reminds us that markets can phrase the same transaction in several different ways, making it hard to ban particular ones. This forces you to think carefully about exactly what kind of transaction you want to prohibit when you say that e.g. options trading, fractional reserve banking, etc. should be illegal.

2 comments:

Anonymous said...

Silas,
Is it true that you got banned on Mises.org? Peter Surda said you did...

Silas Barta said...

Yes, I did. Apparently, too much gadflyishness on the IP issue again :-(